Sunday, April 30, 2006

Early Amazon: Auctions

In March of 1999, Amazon.com launched an auction site to compete with eBay.

Behind the scenes, this was a herculean effort. People from around the company were pulled off their projects. The entire Auction site, with all the features of eBay and more, was built from scratch. It was designed, architected, developed, tested, and launched in under three months.

In addition to a fair amount of architecture work, I had the task of designing and coding the account system, everything around registration and login of buyers and sellers.

Rather boring stuff, I thought, and perhaps that was tempting fate. Just a couple weeks from launch, Jeff Bezos decided to reverse a fundamental design decision that required rewriting almost the entire account system.

I was told about Bezos' decision late one Friday afternoon. I designed the new system that Friday evening. I came in at 7am the next morning and started a frenzy of coding. I left again at 11pm, then came back at 7am that Sunday morning. At 6pm Sunday evening, blurry-eyed, I had done all the testing I could stand to do.

The hastily written code seemed solid, but I feared that was wishful thinking on my part. Perhaps to lower expectations, perhaps just crazed from sleep deprivation, Sunday evening I committed to the source repository what I called the "Share My Pain" release.

The next day, to my pleasant surprise, few bugs were found in the new code. Those minor pains and the remaining issues elsewhere were quickly resolved. Amazon Auctions somehow launched on time, an entire business built in three short months.

Amazon Auctions was designed to be a frontal assault on eBay, reproducing everything they had in one fell swoop. Amazon thought its tens of millions of customers would immediately adapt to auctions and small businesses would flock to our site. It was an aggressive move that was foolishly arrogant.

When the site launched, it was technically superior to eBay's, faster, better search, and several new useful features. The inventory was reasonable, but not large.

Over the following months, the site did not grow as rapidly as some at Amazon optimistically projected. Amazon customers turned out to be quite timid about exploring the auction site, fearful of the lack of guarantees and customer service, unattracted to the idea of bidding.

Amazon Auctions stalled. Sellers moved away. Eventually, Amazon just gave up on it. While Amazon Auctions occasionally twitches in its sad resting spot on the current Amazon site, it is all but dead now.

It did not have to be that way. We were building this from scratch, and there was a lively debate inside Amazon about what we should build.

The debate fell into three camps. The main group argued that we should duplicate eBay and assault them head on.

The other two groups wanted a narrower focus. One (which included me) argued that we should optimize for medium-sized and large businesses instead of small sellers, stealing away the top end of the market. The other argued that we should focus on dominating auctions of books, music, and video -- the core product lines of Amazon -- and leave selling beanie babies and other oddities to eBay.

The "head on assault" crowd won, and then ultimately lost. Over the last several years, Amazon eventually migrated its strategy to versions of what the other two camps advocated. Amazon now allows third party sellers (mostly medium and large businesses) to sell items on its product pages (not collectibles and oddities).

Perhaps the only way Amazon could develop its current third party selling strategy was to experiment and learn along this circuitous path. But I cannot help but think that it could have gotten to this place faster had we been more humble back in 1999.

10 comments:

Greg, I'm interested in where you'd rate Amazon's "used books" listings among the technological and economical feats of Amazon. Having bought and sold probably close to 100 books via Amazon.com's used system, it seems easy and it's hard to imagine that it's not a high profit margin item for Amazon. (If I sell a $20 book to someone across the country, I handle all customer support and shipping and Amazon makes ~$3 for simply providing a listing service.... granted, there can be some customer service issues if the buyer/seller drop off the face of the Earth or are scammers, but this has only happened once to me in my many, many transactions.)

Amazon acquired a company I co-founded (LiveBid) as part of their push into auctions. This brought me in the door at Amazon, where I had a couple of roller-coaster years. Great folks, cool stuff to do... but some pretty whipsawed direction shifts over that time.

Unfortunately, LiveBid's auction-broadcast service got turned off when the Amazon Auctions group was scaled back. Sometimes I miss it.

Anyway, to your point at hand: I think the primary difference was that the customer behavior was so very dichotomous. Amazon customers loved the convenience of spear-fishing - come in, find the product, hit one-click, and move on. That's a great market. But it doesn't map very well to the browse-extensively, bid-on-many-things, return-to-the-site-often eBay model. Different communities, different usage models... no surprise that the Amazon customer base didn't immediately glom on to a different way of doing things.

That's my $0.02 anyway - I'm sure there's any number of other reasons!

Great post. It's probably true that Amazon Auctions failed because it didn't attract a "community" of small sellers.

There has always been the perception that eBay is mom-and-pop auctions, and Amazon is fixed-price new merchandise, period. For example, when I tell people I make my living selling used books on Amazon, 99 percent of them don't have the foggiest idea what I'm talking about.

It will be interesting to see if eBay's fixed-price Express platform can change the perceptions, and take some steam out of Amazon Marketplace. Express is a great concept, but the execution (so far) is giving me some doubts.

You've absolutely nailed how the auctions launch was treated inside the company. Sometime early on a group of about 20 CS reps were handpicked for a super-secret operation and were literally quarantined from the rest of CS.

In the meantime, those who weren't picked had a great time prognosticating. If memory serves, we still had "tab launches" in those days and we were always taking bets about what tab would come next. After the Music tab was launched, smart money was on stuff like "office supplies" or "DVDs" or something. I personally went all-in on "Red Meat." A long shot, sure, but if that sucker paid off I wouldn't have to bother with stock options...

My wife and I had been successful Amazon Auction Sellers, utilizing the Pro Merchant program. We quit for two main reasons: one was that Amazon "lost" well over 3,000 of our auctions ... eventually replacing over half of them, and giving us "compensation" of $20! The other was that Amazon ended the tab for auctions on their main page, simply making finding their Auctions very difficult for the general public; a phenomenon which remains today. I wish that they would vigoursly try to compete with eBay, as they have the ability and resources, but just not the will. Competition is the strength of our Capitalistic System, and without having an effective competitor in the Internet Auction world, we'll continue to be stuck with eBay and its high fees!

I bought and sold on Amazon auctions and I can tell you with 100% certainty it failed because the experience was just awful and NOTHING at all like ebay. From the selling side my auction was impossible to find! Let me repeat that… I couldn’t even find my own auction page! From the selling side I had other issues but when you can’t even find your own auction does it even matter? After a few try’s I gave up on it. From my POV as a seller it was awful, just purely awful!!!

From a buyers POV it was again just awful. From what I recall it seems you guys created a system where the auction never ended. So when I or somebody else would bid on an item the auction ending time was reset for another 5 minutes or so. Who’s stupid idea was that? I remember that little feature alone would drive prices up to “why bother” levels on some items. Sorry but the truth is ebay at the time was just worlds better… MUCH MUCH BETTER.